In our increasingly globalised world, international expansion has become a natural path for businesses that outgrow their national markets. But broader horizons bring hurdles as well as opportunities – and these include the numerous problems caused by international, or “cross-border”, chargebacks. This article will take an in-depth look at these issues, and how best to prevent them from infringing on your profits.
What Are International Chargebacks?
International chargebacks are disputes filed by cardholders against merchants in another country. For instance, if a cardholder in Spain purchases goods or services from a Japanese company, and then disputes the transaction, the result is an international chargeback. On the surface, international chargebacks work like domestic chargebacks – merchants can either choose to accept the charge or fight it with compelling evidence. But as we’ll see, these disputes are subject to several additional complications that make them much more difficult to counter.
What Makes International Chargebacks So Challenging?
Chargebacks, both domestic and international, are a growing problem for merchants. Global friendly fraud is on the rise, costing merchants $100BN in 2024, and accounting for up to 80% of all chargebacks. But despite the vast majority of chargebacks being illegitimate, and therefore winnable, merchants only win an average of 30% of disputes.
International chargebacks can be even more challenging partly because merchants are often in unfamiliar territory – legal, regulatory, cultural – when it comes to how disputes are handled by local ecosystem players. But that’s only the tip of the iceberg. Other issues include:
Fees: Banking and Shipping
Lost chargebacks are expensive – merchants lose the value of their product or service, the payment, the shipping fees, and may face additional fees, fines, and penalties from their acquirer or card scheme. With international chargebacks, these costs multiply. Cross-border transactions typically incur higher processing fees, currency conversion charges, and international shipping costs, making these disputes significantly more expensive than their domestic counterparts.
Language Barriers and Border Problems
International chargebacks introduce a host of communication and logistical challenges that can seriously impede dispute resolution. Evidence must often be translated, creating additional costs and the risk of misinterpretation, while different time zones and banking holidays can delay response times. Moreover, varying consumer protection laws and banking regulations across jurisdictions can make it difficult to determine which rules apply to any given dispute.
Customs procedures can become an additional problem – cardholders may file disputes if goods are delayed or seized at customs, regardless of whether or not they bear responsibility. For instance, EU imports to the UK have been subject to 20% VAT and import duty charges since 2021 – and they cannot be delivered until these charges are paid. This has come to the surprise of many UK cardholders who have failed to read the terms and conditions of their purchase, and file illegitimate chargebacks as a result.
Cross-border Fraudsters and High Risk Countries
Cross-border chargebacks are particularly damaging because they occur at higher rates than domestic disputes. European Central Bank research reveals that while only 11% of EU transactions occur across borders, these account for 63% of credit card fraud losses. This is likely due to fraudsters exploiting the complexities of cross-border commerce, knowing that distance, language barriers, and jurisdictional issues make it harder for merchants to fight back.
Certain regions have become notorious for elevated fraud rates, forcing merchants to choose between accepting these risks or foregoing these potentially lucrative markets.
Fighting International Chargebacks
While no single solution can eliminate all cross-border disputes, implementing robust prevention and management systems can significantly reduce their impact. The best systems combine compelling evidence collection, selective shipping, and smart, multilingual chargeback tools. We’ll explore each of these in detail below:
Robust Evidence Collection
The key to winning any chargeback lies in providing evidence that an issuer deems compelling, but international disputes demand an even higher standard of proof. Documentation must be gathered in formats that work across different jurisdictions, and translated accurately into relevant languages. The evidence must also account for regulatory variation across regions, as what constitutes compelling evidence can change dramatically between countries. Compelling evidence for international disputes often includes:
- Detailed transaction records in both local and customer currencies
- Shipping documentation with international tracking numbers
- Customer communication logs in relevant translations
- Clear proof of delivery with signature confirmation
- Records of all customer service interactions
- Screenshots and translations of relevant website policies and disclosures
Be Selective About Where You Ship
While global reach offers significant opportunities, merchants must carefully weigh the risks and rewards of each market they enter. Some regions present such significant fraud risks that the potential revenue may not justify the merchant’s exposure. This is particularly true of markets known for high rates of friendly fraud, where fraud prevention tools will prove less effective, and where many legitimate sales may later result in illegitimate disputes. Smart merchants analyze fraud rates, chargeback statistics, and regulatory requirements before expanding into new regions.
Chargeback Tools: Automated and Multilingual
Due to the labor-intensive nature of cross-border disputes, automated chargeback management solutions have become essential for merchants operating in multiple markets. Smart chargeback tools can handle the intricate requirements of international disputes, from automatically collecting and collating the many types of compelling evidence required, to representment translation (which we have recently introduced at Justt), and ensuring compliance with regional regulations. The best modern solutions also offer real-time monitoring and response capabilities, helping merchants stay ahead of dispute deadlines regardless of time zone differences.
The Rise of Global Commerce: Managing Cross-Border Chargeback Risk
The age of ecommerce has created unprecedented opportunities for merchants to reach global markets, but these possibilities are accompanied by the risk of cross-border disputes. Merchants must therefore balance their expansion with counterfraud strategies – evidence collection must be comprehensive and jurisdiction-appropriate, market selection must be strategic rather than simply opportunistic, and dispute management systems must be capable of handling multi-language, multi-currency operations at scale. Only with these elements in place can merchants confidently pursue global opportunities while protecting their revenue from illegitimate disputes.
